3.0

SOUTHCO’S PROPOSAL

3.1

SOUTHCO has submitted calculations of it’s expected revenue from charges and it’s revenue requirement for the year 2000-2001 along with a proposal for new tariff.

3.2

Considerations requiring new tariff in place of existing tariff which have been advanced by SOUTHCO are given below:

3.2.1

Revenue from tariff increase granted by OERC in RST order of December, 1999 was found to be only notional as certain concessions granted to industrial consumers had completely nullified the effect of RST revision. Certain legitimate and reasonable expenses were disallowed.

3.2.2

The extent of losses has substantially increased during the year 1999-2000 as compared to the previous year and the same trend continues for the year 2000-2001.

3.2.3

SOUTHCO’s financial viability affected due to insufficient tariff increase during last two tariff orders. It is found that for the purpose of rationalisation of tariff or for creating consumer friendly environment, certain concessions have been given to consumers for which the financial implications were either not anticipated or not provided for.

3.2.4

The effect of withdrawal of minimum charges, extending of power factor incentive, load factor incentive, due date payment incentive and reduction of meter rent, was not adequately provided for in previous tariff orders. In spite of a tariff hike of about 10% in RST order of November, 1998, and an increase of around 4% in RST order of December 1999, the average price realisation per unit has come down by 5% from Rs.2.51 to RS.2.39 over the period under review.

3.2.5

The impacts of cyclone have affected the very basis of financial viability of SOUTHCO.

3.3

SOUTHCO has considered the following main inputs for the calculation of revenue requirement :-

Power Purchase Expenses
Employee Cost
Administrative and General Expenses
Repair and Maintenance Expenses
Provision for bad and doubtful debts
Depreciation
Interest on loan
Interest capitalized
Interest on Working Capital
Statutory appropriation
Reasonable Return

3.3.1

SOUTHCO estimates power purchase of 1534 MU with an average of monthly maximum demand of 277 MVA during 2000-2001. Demand has been estimated on the basis of trend in the current year and first four months of the ensuring year. SOUTHCO estimates an energy sale of 952MU.

3.3.2

SOUTHCO has stated that the Distribution Loss has been fixed at 38% during 2000-2001 targeting a reduction of 4% to be achieved during the year.

3.4

Total expenditure including power purchase cost for the year 2000-2001 is estimated as Rs.334.82 crores. The other components included in the above expenditure are Employees Cost, Cost of Materials, Administrative and General Expenses, interest on loans borrowed from different organization’s bad-debts, depreciation loss capitalization on account of interest expenses. There is a proposal for special appropriation of Rs.10.143 crores to cover contribution to contingency reserve.

3.4.1

SOUTHCO estimated to earn a reasonable return of Rs.1.751 crores on it’s capital base of Rs.5.267 crores. The revenue requirement and estimated reasonable return for the financial year 2000-2001 proposed by SOUTHCO is in Table : 1.

Table : 1
Revenue Requirement of SOUTHCO for the year 2000-01

3.4.2

The revenue projection made by SOUTHCO for 2000-2001 is in Table : 2.

Table : 2
Estimated Revenue from Charges for 2000-2001

3.4.3

SOUTHCO has stated that the existing tariff is inadequate to meet the estimated total revenue requirement of Rs.336.57 crores for the financial year 2000-01.

3.4.4

SOUTHCO has stated that if the shortfall in the revenue requirement is to be met, it requires revision of tariff by 47%. However, SOUTHCO has proposed an average rise of 38%.

3.5

SOUTHCO has proposed Rs.9.02 crores under special appropriation to cover 1/10^th of their past losses.

3.6

The tariff proposal does not envisage any subsidy from the Govt. of Orissa or any other source. The State Government has significant role to play in balancing the varying interests of different classes of consumers.

3.7

SOUTHCO has stated that in case OERC or Govt. of Orissa desire to further subsidize any consumer category, the difference between the proposed revenue and the subsidized tariff should be provided to SOUTHCO.

3.8

In proposing the tariff, SOUTHCO is stated to have acted on the following principles :-

Lower tariff for consumers supplied at higher voltage level.
Reduction in cross subsidy.

3.8.1

SOUTHCO has proposed the existing rates of Demand Charge and Monthly Minimum Fixed Charge to continue in the new tariff for 2000-01. But it proposes new rates for energy charges of the following categories of consumers.

3.9

SOUTHCO intends phasing out of cross subsidies to be faster or the pace of transfer of economic price to LT consumer is to be slower.

3.10

On the aforesaid grounds, SOUTHCO has sought for approval of :-

1. The proposed new tariff replacing the existing retail tariff and charges.

2. Revenue requirement for the year 2000-2001.

3. The expected revenue from the charges of SOUTHCO for the year 2000-2001.

4. Permission to carry forward the gap between expected revenue and the revenue requirement in 2000-01 and the unabsorbed portion of past loss for adjustment in future years.